Flurry of low Earth orbit satellite activity blasts IoT radio wars into space

The FCC's approval (for spectrum use in United States) of OneWeb's system of over 700 satellites in low Earth orbit (aka a satellite constellation), and an even more aggressive plan from Elon Musk's SpaceX to field more than 4,000 in LEO, is driving the private industry version of the Space Race. OneWeb has high-profile backers, including Richard Branson (Virgin) and Masayoshi Son (SoftBank). Both companies are promising to change the economic and performance characteristics of satellite communication systems (albeit with different strategies), which will primarily target the opportunities to delivery broadband internet connectivity services, in some cases directly to consumers. Providing connectivity services to augment existing IoT networks is often cited as a key demand driver, although the primary usage will be to augment existing bandwidth capacity to support the globe's insatiable demands for reliable internet access, especially where reliable service has been difficult to deliver for traditional CSPs, such as sparsely populated areas, over the ocean and harsh environments.

The 451 Take

The emergence of a new crop of LEO satellite service providers has re-energized interest in delivering internet services from space. Upstarts like OneWeb often talk about IoT as a demand driver, but we advise caution in accepting this as a long-term data volume driver. While many IoT use cases are currently served by private networks, or not served at all, the volume of such cases is unlikely to move the needle for LEO companies like OneWeb and SpaceX. The investment thesis that must be scrutinized most closely is the ability to consistently and cost-effectively deliver broadband services to the underserved reaches of the globe where latent demand exists. The challenges facing LEO providers are many, including spectrum allocation and sharing, and environmental concerns about creating space junkyards. Applying LEO capabilities to developing areas like V2V autonomous driving is probably not realistic, due to latency requirements and the motivation of terrestrial broadband players to defend their turf to deliver all manners of connected vehicle services. In this context, the LEOs and global operators are far more likely to enter partnerships to economically augment their network reach.

Space internet – reversing a history of failure
Sometimes good ideas arrive too early, when the market isn't quite ready. Upstarts like OneWeb and SpaceX are banking on this – the idea of delivering internet and communication services from space is not new, and has burned investors in the past. Examples of LEO satellite firms that ran into these challenges in 90s include Iridium Satellite and Globalstar, which ended up filing for bankruptcy (and later emerging after restructuring). The challenges Iridium faced were mostly related to sluggish demand, while Globalstar was plagued by launch delays and actual failures. A Bill Gates-backed satellite contender in the 1990s called Teledesic also planned a massive LEO constellation of 840 satellites costing $9bn, but halted the project midstream, scared off by the failures of Iridium and Globalstar.

OneWeb and SpaceX leaders publicly exude confidence in their ability to achieve successful outcomes this time around, with step-change advances in launch cost efficiency, technical performance, mass production capacities, strong global broadband demand boosted by the impending arrival of 5G networks and bandwidth-hungry devices, and wide swaths of populations underserved by today's terrestrial systems. Boeing has also announced plans to launch a network of LEO satellites with the financial backing of Apple. Fixed-satellite service fleet operator SES has signaled that it will also jump into the market for LEO satellite service if the pioneers demonstrate the business is viable.

A short primer on satellite orbits
Satellite systems designed to deliver broadband connectivity bring significant advantages over their terrestrial counterparts (i.e., fixed and cellular) in terms their viability to attain geographic coverage. The earth, after all, is 90% covered in ocean and harsh/sparsely populated land mass. Connectivity is still required where people don't live but sometimes travel. There are many satellite systems that exist today to serve that very purpose, the major differences between today's satellite technologies boil down to orbit trajectories and correlated performance characteristics, and cost.

There are generally three types of satellites, which are classified by their orbit around or with Earth. LEO, medium Earth orbit (MEO) and geostationary Earth orbit (GEO), which is also known as fixed-satellite service. These LEO satellite systems operate at a distance of roughly 1,000 miles above Earth. MEO satellites orbit between approximately 5,000-10,000 miles above Earth, while GEO satellites are 'fixed' in that they follow the direction of the Earth's rotation from a distance of 22,000 miles. The advantage of GEO systems is that tracking devices can fix onto its position. The disadvantage, not surprisingly, is that latencies from that distance are not conducive to real-time communications or low-latency applications. With an LEO system, these performance characteristics are overcome by the satellite's physical proximity to the ground, but such systems have the drawback of requiring a significantly large volume of satellites to provide adequate coverage and performance, and end-user equipment that is capable of tracking the fast-moving satellites, which adds cost – usually with phased array antennas. The current hype and investment momentum is centered on LEO satellite systems because of the potential performance and economic advantages driven in part by innovation in satellite design and tight controls of the value chain.

SpaceX will both design and launch its own satellite network (via its own Falcon 9 rockets), thereby tightly controlling its quality and costs. Current plans have SpaceX launching its first satellites in 2019, with full network coverage by 2024. OneWeb's satellite building joint venture with Airbus – OneWeb Satellites – has also broken ground on a high-volume satellite manufacturing facility in Florida. For instance, OneWeb's constellation is designed to deliver around 10x better latency performance (20-30ms), while a GEO system can struggle to achieve 300-500ms. Latency of 20-30ms is equivalent to an excellent home fiber-based broadband consumer service and can handily support latency-sensitive applications like online gaming and communication services like Skype. While a portion of demand currently served by GEO/MEO should shift to these new LEO systems, there are several applications for which MEO and GEO service will continue to be adequate, such as point-to-multi-point video distribution and direct-to-home broadcasting. It's reasonable to think of LEOs as augmenting the established MEO/GEO services versus replacement. The most potent LEO potential is to bring low-cost broadband connectivity to people that have never had it before – hence OneWeb's own mission statement to 'bridge the digital divide by 2027.' To this end, OneWeb has said that, starting in 2019, it will be able to offer broadband services to Alaskan homes, schools and businesses where thousands of citizens are currently without adequate broadband service.

How will LEOs impact IoT?
The emerging Internet of Things market as a driver of LEO bandwidth demand must be put into proper context. In short, it won't be a big driver in terms of revenue for LEO providers, but it could have a major impact on key use cases, such as on remote mining operations. For a similar order of magnitude, just think about global telecom operators like AT&T, Vodafone and Verizon. Each is making major investments in networks and applications for IoT, but the revenue generated is less than 2% of their massive totals, and in 10 years they will still generate less than 10% from IoT if they are wildly successful. We don't expect LEOs to fare better – and much likely worse – since the connectivity leg of IoT value chains is the most rapidly commodifying.

The capabilities offered by LEO should bring great benefit and cost efficiency to industrial IoT markets that are either underserved by public networks or not served at all, and therefore using private network technologies. Take as an example the mining industry, which has gone through a recent 'boom then bust' period generally aligned with China's 'supercycle' of demand and the financial crisis. In the long term, the reality is that global demand for mined resources will require that mines be built in places that are increasingly less hospitable to humans in the far-flung reaches of the globe. Operating such mines bring massive costs and safety challenges, which are being met with automation technologies such as fully autonomous mining equipment. Today, these mining operations are far enough off the beaten path that private network buildouts are the only option – so they have deployed their own private LTE networks. Mining company Rio Tinto, in Pilbara mine in western Australia, deployed a private single and converged ultra-broadband 4G LTE network for its pit fields, railways and ports. A public alternative from SpaceX or OneWeb could offer major cost advantages over the capex/opex of private implementation, although latencies for mission-critical collision avoidance will still require a private alternative or 5G. Another attractive possibility is providing local connectivity via LPWAN alternatives, such as LoRa coverage of (for example) agricultural sensors with an LEO backhaul where terrestrial alternatives are not possible or economical. Longtime satellite operator Inmarsat recently joined the LoRa Alliance, and is the first satellite operator to do so.

OneWeb and SpaceX could ultimately end up competing directly with terrestrial broadband providers for consumer and enterprise data services, but that is a long way off. LEO advantage and low-hanging fruit will be most prominent where fiber trenches and upgraded radio towers are not currently economically feasible. Costs will need to be low enough to spur demand in places like Africa. Bringing the fight to customers where terrestrial coverage is well established is another story altogether. This is a fight LEOs will find difficult to win. In general, the LEOs are entering just about the riskiest and most complex business there is.

Even if they can execute plans perfectly, there are gremlins lurking in every corner, such as managing issues like spectrum acquisition, allocation and sharing on a country-by-country basis; the environmental issue of creating a massive graveyard of space junk in an overcrowded LEO; the ever-increasing risk of cyberattack on critical satellite infrastructure; and the actual technical complexity of managing a large constellation – all while traditional GEO and terrestrial bandwidth providers improve their own capabilities. Win or lose, the LEOs have injected excitement, innovation and interest back into the satellite industry, which will help the entire GEO/MEO/LEO ecosystem improve.

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